Teslas Texas problem: The perfect battle between Elon Musk and Lone Star States auto dealers and the lawmakers who protect them – mySA

Frank Rogers went to Teslas service center near the Dominion in 2018 and took his first-ever spin in an all-electric Model 3.

The thing that attracted me first was the technology, and when I got behind the wheel, it was the thrill of the ride, said Rogers, CEO of a small-business services firm. Its like being on a roller coaster, but you can control how fast you go.

A self-described computer geek, Rogers rushed home to buy one on the electric car makers website, carefully selecting the color, type of wheels, interior design and battery options.

Three months later, Rogers received his blue Model 3 with the 30-day temporary license plate tags at his home. A Tesla-contracted broker in the Dallas area helped him secure his registration and license plates.

We signed the documents sent to us and it was pretty much hands-off, he said. But it took about three more months to get the plates.

He had to return to Teslas far North Side service center three times to pick up new temporary license tags.

Earlier this year, his wife went online to buy a Tesla Model Y. But without a broker, Rogers said, it was a fiasco, with her driving to several drivers license branch locations to obtain plates. It was just not knowing where to go.

Rogers suspects Tesla buyers in Texas wouldnt experience such hassles if the automaker could sell its vehicles directly to consumers. But it cant. Texas law requires auto manufacturers to sell their cars, trucks and SUVs through franchised dealerships.

Texas customers must buy Tesla vehicles on the companys website and fill out paperwork through email.

Here, Tesla remains limited to operating showrooms and service centers, such as the Dominion location. Employees offer test drives out of these sleek, Apple Store-inspired storefronts, but they cant discuss pricing with potential car buyers or help with services most dealerships provide, like getting plates and registration.

If Tesla could have helped us out to figure out where to go it wouldve been easier, just like dealerships, Rogers said. But with Tesla not being able to sell in Texas, that was on us to do.

Selling directly to buyers over the internet is the heart of Teslas distribution model, and co-founder and CEO Elon Musk doesnt appear to be budging on that front.

And partnering with third-party dealerships is seemingly out of the question; in fact, Tesla has been trying to tear down franchise dealership laws across the country.

Though Tesla has managed to overturn such laws in other states, including New Jersey and Massachusetts, it has repeatedly failed in Texas.

But Tesla may be playing a stronger hand in Texas than ever before. The company is building a $1.1 billion Cybertruck plant in Austin, and Musk announced Oct. 7 that its moving its headquarters from Palo Alto, Calif., to the state capital.

Given the size of Teslas investment here in addition to the Texas operations of SpaceX, Musks other major venture will Gov. Greg Abbott and state lawmakers finally consider upending the dealership law?

Tech entrepreneurs Martin Eberhard and Marc Tarpenning got Tesla rolling in 2003, with Musk largely bankrolling the company with part of the $180 million hed made from the 2002 sale of PayPal which he co-founded to Ebay. The idea was to start with a luxury all-electric roadster, perfect its carmaking skills and eventually sell less expensive electric vehicles to the masses.

Its succeeding. In its third quarter, Tesla sold a record-breaking 241,000 electric vehicles, despite tangles in its supply chain.

Yet traditional dealerships across the country and lawmakers who protect them are resisting Teslas direct-to-consumer push. Texas is one of nearly 25 states that either ban automakers from cutting dealerships out of the picture or put restrictions on manufacturers sales directly to their customers.

What were asking for from the Texas Legislature is really simple, Musk said in 2013 when Tesla first attempted to undo the franchise law. Let us sell our cars directly to the people of Texas like were able to do in most of the country.

The Texas Automobile Dealers Association fended off the bill that year and fought follow-up legislation in the past four sessions. The organization represents more than 1,200 dealerships across the state, many of whose owners are rich and politically connected in their communities.

This is really the perfect battle as these two interests collide, said Raji Srinivasan, an associate dean at the McCombs School of Business at the University of Texas at Austin.

Looking to take emissions-free vehicles into the mainstream, Musk has introduced a disruptive technology to the traditional car model, she said. And its internet-driven sales system is as much a challenge to traditional dealerships as its sought-after electric vehicles are to major automakers.

April Ancira, chairwoman of both the Texas and San Antonio auto dealer associations, testified against Tesla-backed bills in the latest legislative session.

Its not that Tesla itself is so frightening, she said. Its just that we would hate to see one thing cause the demise of the backbone of America: family-owned, midsized businesses that are engaged in their communities and are great for their consumers considering the competitive pricing.

As the vice president of the Ancira Auto Group in San Antonio, Ancira said she supports Teslas plan to move its headquarters to Texas. But she said shes baffled by the companys decision to forgo the franchise model, in which automakers can use dealerships to have a mass distribution point without having to put up all of the capital and all of the risk on it.

She wonders whether Musk would ever change his mind and partner with dealerships.

I dont know a dealer out there who wouldnt raise their hand, Ancira said. If he said lets do the dealership thing, Id say, Where do you want me to build?

State Sen. Jos Menndez said he has always been consistent on my opposition to changing the law for one manufacturer. In past legislative sessions, the San Antonio Democrat worked across the political aisle to prevent the Big Three automakers and now Tesla from killing the state dealership law.

I dont think Mr. Musk decided to move his headquarters to Texas because it was going to buy favor with legislators, Menndez said. Because if that was his thinking, hes wrong.

Neither Abbott nor Musk responded to requests for comment for this story. Tesla did not respond to questions as of press time, either.

Tesla has employed a plethora of lobbyists for nearly a decade trying to influence legislators, but theyve fallen short because the franchise dealership model is not broken, Menndez said.

He cited the economic benefits of local dealerships. San Antonios 78 dealers, he said, employ 8,700 workers who make an average annual salary of $69,000, with an overall payroll of $600 million.

With all due respect, Mr. Musk, the state of Texas has gone over 150 years just fine without having to accommodate you, he said. Im sure well do just fine if you choose not to play by the rules.

Menndez said he is a huge fan of the Tesla products and offered an olive branch, of sorts.

The day that Mr. Musk chooses to play by the rules that we have in Texas is the day that Ill look at purchasing a Model S, but not anytime before, he said.

Back at his San Antonio business, Frank Rogers said he expects lawmakers to continue icing out Tesla.

Its the Big Three that are keeping those other manufacturers from selling directly to consumers, he said. Its a union thing. Its a politics thing. Its nothing about how good the cars are and how much people like the cars.

Rogers said he could not imagine Musk partnering with a franchised dealership, since his whole philosophy is to move the world toward sustainable energy, and I dont think hed park his car alongside a gas-powered car.

Michael Danberry, president of the Tesla Owners Club of San Antonio, said the company-sanctioned group has garnered 246 members since forming last year. Other Tesla owners groups exist in Austin, Houston and North Texas.

After retiring from the Army, Danberry test-drove his first Tesla in Kansas City, Mo., in 2017.

The test drive is what will hook you, he said. It just goes. Theres no sound. No shifting. Its just a quiet go.

Danberry placed an online order from the Tesla showroom for a Model S. Two years later, he and his family had moved to Dripping Springs, just outside Austin, when his wife, Carla who also retired from the Army bought a Model X over the internet. She had the same hassles Frank Rogers and his wife experienced.

In Texas, they can show you a car and they can deliver the car, but they cant sell you the car, Danberry said.

The club president said he supports Teslas mission to create an entire sustainable energy ecosystem, adding: Tesla is more than a car company theyre a technology company.

Teslas have become a common sight on Texas roadways, particularly in metro areas which means the states dealership law hasnt stopped buyers like Danberry. But he worries that the law and similar ones in other states may hinder startup electric vehicle makers such as Rivian and Lucid, both based in California.

These new vehicle manufacturers dont want to follow the dealership model, he said. They shouldnt have to follow the dealership model.

Srinivasan, the UT professor, said lawmakers in various states, including Texas and Connecticut, have aligned with franchise dealers, which she described as traditional interests.

Still, she believes Texans someday will be able to legally buy Teslas directly from the company, saying, Its a question of time.

As for Ancira, she said she is 99 percent sure the law wont change in the next Legislature. But shes concerned about legislative sessions further out, as more dealer-friendly lawmakers such as state Rep. Lyle Larson, R-San Antonio, retire.

You get put in the spot where you need to retell your story to ensure that theres no disconnect from one session to another and build those relationships on a continuous basis as those players begin to change, she said. Were concerned. But were trying to stay on top of this as best as we can.

eric.killelea@express-news.net

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Teslas Texas problem: The perfect battle between Elon Musk and Lone Star States auto dealers and the lawmakers who protect them - mySA